Oil slumps as jobs data bring more economic fears

PolyaLesova

MomingZhou

SAN FRANCISCO (MarketWatch) -- Crude-oil futures fell for a second day on Friday, tumbling 3% as a weaker-than-expected payroll reading rekindled concern that the U.S. economy is falling into a recession.

Earlier Friday, the Organization of Petroleum Exporting Countries decided to keep current output levels unchanged, as expected by most investors.

Crude oil for March delivery slumped $2.79 to end at $88.96 a barrel on the New York Mercantile Exchange. It fell to an intraday low of $88.25 earlier.

U.S. employers cut back their hiring in January for the first time in more than four years, government data released on Friday showed. Nonfarm payrolls fell by an estimated 17,000 in January, the Labor Department said. This is the first decline since August 2003. See Economic Report.

"There was no surprise from OPEC, but the non-farm-payroll numbers were brutal," said James L. Williams of WTRG Economics. The data "gave us the strongest indicator that the U.S. may already be in recession."

OPEC leaves output unchanged

"OPEC's decision to leave production unchanged means that the market will return to trading on economic news, and that news is bad," Williams said. "The payroll numbers should bring bears out of hibernation and send the bulls to the barn," he said.

"In view of the current situation, coupled with the projected economic slowdown, the conference agreed that current OPEC production is sufficient to meet expected demand for the first quarter of the year," OPEC said in a statement. See full story.

"At the same time, however, the conference noted that the significant uncertainties associated with the projected downturn in the global economy called for vigilant attention to their impact on key market fundamentals" until its next meeting on March 5, OPEC said.

Also on Nymex, March reformulated gasoline dropped 7.38 cents to $2.2834 a gallon and March heating oil lost 8.02 cents to $2.4489 a gallon.

March natural gas dropped 32.9 cents to $7.745 per million British thermal units.

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